The Budget Planner
Doing the budget planner accurately should take about an hour. It’s best if you gather together your bank and credit card statements first, preferably the last three months’ worth. Between them it should list all standing orders, direct debits and give you an accurate idea of what you spend.
For example, for food shopping, gather together all your receipts for the last three months, add up all food spending listed, then divide by three to reach your average monthly spend.
If you can, also gather together your payslips to establish exactly what you earn plus any bills or other documents if possible (though your statements should also detail this info).
MoneySave as you go!
It’s always surprising to see quite how many things you spend on. Worse still is how much you spend on them. Yet there are always ways to save. It’s worth considering if you’re getting the best value for money? Can you cut costs? The Money Makeover will help.
What the result really means.
Now we have a true picture of your income expenditure. Hopefully you’ve pressed the button at the end which tells you the real truth of your finances. Either you spend more than you earn or you earn more than you spend.
Well done you!
Providing you’ve been honest with yourself, it’s time to relax a little – but MoneySaving doesn’t stop there. In fact it’s just beginning. Paying less for things means you have more money in your pocket to enjoy life more (and possibly save some for the future too!).
The typical savings from doing this can be �3,000 – �5,000 a year. My estimate is it’ll take a full day’s work but look at the return. It’ll be the best paid work you’ve ever done. The whole site is dedicated to doing this in every area of your lifestyle, but to get started read the Money Makeover article.
Don’t run the risk of a debt spiral – sort it now!
Spending more than you earn may not seem like a big deal, yet it’s a potential disaster – and not just financially. At best you’re eroding your savings; at worst, you’ll need to borrow.
And this type of borrowing is the worst as it means you can’t afford your lifestyle and thus there’s no planning to the debt and no end in sight. Sadly, I’ve seen this result in debt crisis too many times, and that doesn’t just hit your pocket: it can hurt your home, family, mental health and relationship.
You may feel this is over-dramatising. But when there’s no money left and you can’t borrow more – and the creditors are asking for money back which you’ve no ability to repay – it touches every element of your life. This danger is what’s called a ‘debt spiral’. It works like this:
Many people fool themselves about this, a common thought is, “that doesn’t happen to nice families like us”. Well, I’m afraid even if you’re middle class, you’re not insulated from debt. In fact you’re in the prime category for debt crisis. It’s crucial to take the blinkers off.
Far too many people in work with good salaries have bigger debts. If your non-mortgage debts exceed half your after-tax salary, it’s a real issue.
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